Analyzing Business Markets

The decision-making process by which formal organizations establish the need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

-- F. Webster Jr and Y. Wind

Organizational Buying

Business Markets

Agriculture

Communications

Banking & Finance

Transportation & Distribution

Construction

ForestryManufacturing

Business Markets

• Understanding deep customer needs

• Identify areas for growth

• Improving value management techniques

• Calculating better marketing metrics

• Competing and growing in global markets

• Countering product commoditization

• Gain support for the marketing concept

Similarities to the Consumer Market

Business Markets

Professional Buyers

Geographically Concentrated

Multiple Sales Calls

Differences to the Consumer Market

Personal Relationships

Fewer, Larger Buyers

Business Markets

Demand• Derived• Inelastic: • Fluctuating

Derived Demand: Demand in the business market depends on demand from the consumer market.

Differences to the Consumer Market

Fluctuating Demand

$$Inelastic Demand:Total demand for many business goods and services is inelastic – that is, not affected too much by changes in price.

Buying Situations

Straight Rebuy: Purchasing department coordinates with suppliers whenever they need something

New Task: A purchaser buys the product first time like office building, machinery

Modified Rebuy: When product specifications, delivery

requirements, or other terms changed on the request of buyer

Systems Buying and Selling

Buyer

Prime Contractor

Second-tier Contractors

• Systems buying originated with the government awarding contracts for weapons and communications systems. The firm (buyer) solicits bids from prime contractors that, if awarded the bid, would be responsible for assembling the subcomponents of the system from second-tier contractors.• Systems selling as a marketing tool. The contractor (seller) approaches a potential buyer and offers to provide all of the organizations MRO (maintenance, repair, and operating) supplies. • Systems selling is a key strategy in bidding on large-scale industrial projects such as dams, pipelines, factories, etc.

Business Buying Participants

Influencer

Buyers Gatekeeper

DeciderInitiator/Users

Approver

Buying Center Influences

Participants differ by:• Interest• Authority• Status• Persuasiveness• Decision criteria

Targeting Firms and Buying Centers

Who to target?

Marketers must determine:Who are the major decision makers? What decisions do the influence?What is their level of influence?What evaluation criteria do they use?

Purchasing/Procurement Process

Diverse supplier base

Benefits vs. Costs

Stages in the Buying Process

Problem Recognition Description and

Characteristics Supplier Search

Proposal Solicitations

Supplier Selection

Order Specification

Performance Review

Stages in the Buying Process

Problem Recognition Internal stimuli

• New product being developed

• Broken machine

• Low stock level

External stimuli

• Trade show visit

• Advertisement

Stages in the Buying Process

Technical specifications• Reliability

• Durability

• Price

Description and Characteristics

Product value analysis

Stages in the Buying Process

Trade directories

Trade advertisements

Trade shows

Supplier Search

E-Procurement Lead generation

Proposal Solicitations

Stages in the Buying Process

Formal presentation

Written

Supplier Selection

Stages in the Buying Process

Supplier-evaluation model

Number of suppliers

Order Specification

Stages in the Buying Process

Technical specifications

Quantity

Delivery time

Return policy

Warranties

Stockless purchase

plan

Stages in the Buying Process

End user evaluations

Weighted-score method

Performance Review

7 9 4 C1 C2 C3 C4 TOTAL

Alts 0.2 0.15 0.4 0.25 A1 25 20 15 30 21.5

A2 10 30 20 30 22A3 30 10 20 10 18

Managing B2B Relationships

One-to-one Marketing

Online social media

Managing B2B Relationships

Vertical Coordination

Relationship FactorsAvailability of alternativesImportance of supplyComplexity of supplySupply market dynamism

Buyer-Seller Relationship Categories

Customer is king

Collaborative

Mutually adaptiveContractual transaction

Cooperative systems

Institutional and Governments Markets

Schools

Hospitals

Prisons

Government agencies

Thank You